Question 1

Accountants can be named as defendants in lawsuits that assert violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).

Accepted Answer

A) True 
 B)False

Question 2

A third party can bring a tort action against an accountant in case of constructive fraud.

Accepted Answer

A) True 
 B)False

Question 3

The Securities and Exchange Commission (SEC)has the power to file criminal charges and award punishment for violations that come under Section 32(a)of the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

Question 4

________ specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements

Accepted Answer

A) Generally accepted accounting principles 
B) Generally accepted auditing standards 
C) Auditor's expert opinions 
D) General engagements and agreements 
A) Generally accepted accounting principles 
B) Generally accepted auditing standards 
C) Auditor's expert opinions 
D) General engagements and agreements

Question 5

A formal entrance into a contract between a client and an accountant is known as an ________.

Accepted Answer

A) abatement 
B) arraignment 
C) easement 
D) engagement 
A) abatement 
B) arraignment 
C) easement 
D) engagement

Question 6

Which of the following is true of an auditor of a corporation?

Accepted Answer

A) The auditor must be an independent certified public accountant. 
B) The auditor cannot use information about the corporation from third parties. 
C) The auditor cannot inspect the corporation's real property unless he is closely associated with the company. 
D) The auditor must provide a qualified opinion wherever possible since it helps the company in business. 
A) The auditor must be an independent certified public accountant. 
B) The auditor cannot use information about the corporation from third parties. 
C) The auditor cannot inspect the corporation's real property unless he is closely associated with the company. 
D) The auditor must provide a qualified opinion wherever possible since it helps the company in business.

Question 7

Under the foreseeability standard,an accountant is liable even if he or she had no knowledge of the intended user of the audited financial statements.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a necessity to bring a private civil action against a violator of Racketeer Influenced and Corrupt Organizations Act (RICO)based on securities fraud?

Accepted Answer

A) The accountant must not be a third-party independent contractor. 
B) The defendant has to be first criminally convicted in connection with the securities fraud. 
C) The plaintiff should file the case before the government brings a lawsuit. 
D) The defendant has to be tried by the application of the Section 32(a)of the Securities Exchange Act of 1934 first. 
A) The accountant must not be a third-party independent contractor. 
B) The defendant has to be first criminally convicted in connection with the securities fraud. 
C) The plaintiff should file the case before the government brings a lawsuit. 
D) The defendant has to be tried by the application of the Section 32(a)of the Securities Exchange Act of 1934 first.

Question 9

An accountant's failure to follow the Generally Accepted Auditing Standards (GAASs)when conducting audits constitutes negligence.

Accepted Answer

A) True 
 B)False

Question 10

The ________ Act of 1976 specifically imposes penalties and fines for the willful understatement of a client's tax liability.

Accepted Answer

A) Tax Reform 
B) Racketeer Influenced and Corrupt Organizations 
C) Private Taxation Litigation Reform 
D) Uniform Securities 
A) Tax Reform 
B) Racketeer Influenced and Corrupt Organizations 
C) Private Taxation Litigation Reform 
D) Uniform Securities

Question 11

Under the Sarbanes-Oxley Act,in order to audit a public company,________.

Accepted Answer

A) only public accountants must constitute the audit committee 
B) a public accounting firm must register with the Public Company Accounting Oversight Board (PCAO
B)  
C) all public accounting firms must assign an accountant who works closely with one client over a long duration of time 
D) the law of accountant-client privilege must be accepted by the state legislative mechanism 
A) only public accountants must constitute the audit committee 
B) a public accounting firm must register with the Public Company Accounting Oversight Board (PCAO
B)  
C) all public accounting firms must assign an accountant who works closely with one client over a long duration of time 
D) the law of accountant-client privilege must be accepted by the state legislative mechanism

Question 12

A verification of a company's books and records pursuant to federal securities laws,state laws,and stock exchange rules that must be performed by an independent certified public accountant (CPA)is known as a(n)________.

Accepted Answer

A) probate 
B) ademption 
C) audit 
D) deposition 
A) probate 
B) ademption 
C) audit 
D) deposition

Question 13

The Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

Accepted Answer

A) True 
 B)False

Question 14

The Sarbanes-Oxley Act makes it lawful for an accounting firm to simultaneously provide audit and certain nonaudit services to a public company if the firm is registered.

Accepted Answer

A) True 
 B)False

Question 15

The ________ is a rule that says that an accountant is liable only for negligence to third parties who are in privity of contract or in a privity-like relationship with the accountant.

Accepted Answer

A) foreseeability standard 
B) Ultramares doctrine 
C) due diligence defense 
D) disclaimer of opinion 
A) foreseeability standard 
B) Ultramares doctrine 
C) due diligence defense 
D) disclaimer of opinion

Question 16

The Private Securities Litigation Reform Act of 1995 replaced proportionate liability of the defendant with joint and several liability.

Accepted Answer

A) True 
 B)False

Question 17

The Securities Exchange Commission (SEC)has oversight and enforcement authority over the Public Company Accounting Oversight Board (PCAOB).

Accepted Answer

A) True 
 B)False

Question 18

A disclaimer of opinion is a clause in auditing that a company can claim wherein the auditor is not allowed to access a high-priority portion of a company's financial records.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true of Section 10A of the Securities Exchange Act of 1934?

Accepted Answer

A) It prohibits any manipulative or deceptive practice in connection with the process of the probate. 
B) It serves as a defense an accountant can assert by claiming due diligence to avoid civil liability. 
C) It enforces a duty on auditors to detect and report illegal acts committed by their clients. 
D) It imposes a criminal liability on accountants for making misstatements or omissions in nonaudit services. 
A) It prohibits any manipulative or deceptive practice in connection with the process of the probate. 
B) It serves as a defense an accountant can assert by claiming due diligence to avoid civil liability. 
C) It enforces a duty on auditors to detect and report illegal acts committed by their clients. 
D) It imposes a criminal liability on accountants for making misstatements or omissions in nonaudit services.

Question 20

A person who practices as an accountant,but is not certified,is referred to as a public accountant.

Accepted Answer

A) True 
 B)False

Exam 51: Accountants Duties and Liability

Accountants can be named as defendants in lawsuits that assert violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).

A third party can bring a tort action against an accountant in case of constructive fraud.

The Securities and Exchange Commission (SEC)has the power to file criminal charges and award punishment for violations that come under Section 32(a)of the Securities Exchange Act of 1934.

________ specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements

A formal entrance into a contract between a client and an accountant is known as an ________.

Which of the following is true of an auditor of a corporation?

Under the foreseeability standard,an accountant is liable even if he or she had no knowledge of the intended user of the audited financial statements.

Which of the following is a necessity to bring a private civil action against a violator of Racketeer Influenced and Corrupt Organizations Act (RICO)based on securities fraud?

An accountant's failure to follow the Generally Accepted Auditing Standards (GAASs)when conducting audits constitutes negligence.

The ________ Act of 1976 specifically imposes penalties and fines for the willful understatement of a client's tax liability.

Under the Sarbanes-Oxley Act,in order to audit a public company,________.

A verification of a company's books and records pursuant to federal securities laws,state laws,and stock exchange rules that must be performed by an independent certified public accountant (CPA)is known as a(n)________.

The Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

The Sarbanes-Oxley Act makes it lawful for an accounting firm to simultaneously provide audit and certain nonaudit services to a public company if the firm is registered.

The ________ is a rule that says that an accountant is liable only for negligence to third parties who are in privity of contract or in a privity-like relationship with the accountant.

The Private Securities Litigation Reform Act of 1995 replaced proportionate liability of the defendant with joint and several liability.

The Securities Exchange Commission (SEC)has oversight and enforcement authority over the Public Company Accounting Oversight Board (PCAOB).

A disclaimer of opinion is a clause in auditing that a company can claim wherein the auditor is not allowed to access a high-priority portion of a company's financial records.

Which of the following is true of Section 10A of the Securities Exchange Act of 1934?

A person who practices as an accountant,but is not certified,is referred to as a public accountant.

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